Will delaying bond money help Maine’s economy?

November 25, 2012 6:58 amUpdated: November 25, 2012 3:55 pm

Pat Wellenbach | AP | BDN

Pat Wellenbach | AP | BDN

Paul LePage

Gov. Paul LePage is holding Maine in a position of limbo by failing to specify what he wants to accomplish by not selling voter-approved bonds until 2014. It’s good that he wants to rein in state spending. But what level of spending will be sufficient to him before he will issue bond money? How does he plan to get to that spending goal? He is concerned about the long-term economic prospects of the state, but he must be careful that his plan to delay bond issues doesn’t backfire, as borrowing has the ability to help spur development.

The state’s land conservation program, Land for Maine’s Future, faces a $2.3 million funding gap that threatens its ability to follow through on commitments it has made to 19 conservation projects across the state. It has pledged to help trusts and other partners purchase land to be used for conservation, recreation, sustainable forestry and farming. The program expected to have enough money in hand after voters approved bond funding in Nov. 2010. But LePage has said he doesn’t plan to sell the bonds until 2014.

The Land for Maine’s Future program is just one entity potentially affected by LePage’s decision not to sell bonds right now. On Nov. 6 Maine voters approved the borrowing of about $64.5 million for road and bridge repairs, water treatment and the conservation program. It’s unlikely those bonds will be sold at market in the near future.

In addition, the Communities for Maine’s Future, part of a bond initiative passed by voters in June 2010, awarded grants to 11 municipalities, many for rehabilitating historic downtown buildings and encouraging reuse, before LePage announced the delay in issuing bond money. Upon request, LePage has provided letters to the towns, saying he will approve the bonds before they expire in 2015. In the meantime, some towns have pieced together new financing arrangements to complete their projects in hopes they’ll be repaid; others have not.

LePage is acting within his legal bounds; the governor and treasurer have five years from the time voters approve bond money to the time the bonds are sold. He has also been clear that he doesn’t intend to let the bonds lapse. But these points raise questions about the worth of waiting. Is the harm of putting off projects — causing people to ultimately spend more in some cases and potentially losing federal matching dollars — offset by a benefit of postponing until a year when the state is projected to have a little less debt?

What is also concerning is that the LePage administration changed course from its original guidance. The Land for Maine’s Future board issued a request for land conservation proposals in early 2011 on advice from the LePage administration. In the case of the Communities for Maine’s Future grants, the rules were changed more than six months after the grants were awarded.

LePage should be clear about his thinking. Spokesmen have said LePage’s position is not based on the individual merits of the projects but on the state’s fiscal situation: The state is still paying debt service on already issued general obligation bonds, and it owes Maine’s hospitals money. But saying “not right now” to reasonable projects — such as to fix roads in order to aid businesses’ productivity and to conserve 22,000 acres near Grand Lake Stream in order to aid an economy dependent on natural-resources based tourism — has the potential to hinder, not help, the state’s long-term economic outlook, particularly at a time when interest rates are at some of the lowest levels ever.

This is not a question of capacity, as the state can take on more debt. The battle over bonds is more about differing visions for how to improve the state’s economy. But unless the LePage administration can explain exactly how waiting two years to issue bonds will help, his move is more likely to be viewed as an ideological bent against borrowing.

By simply saying “not now,” LePage puts possible bond-money recipients on the defensive. They deserve to have a better idea about what the state has to accomplish before the bond money will be released and how putting their projects on hold will help the overall economy. By trying to answer those questions, LePage might find that the bond money actually plays into his larger goals for development.